Tuesday, January 5, 2016

How To Get Yourself Killed

The Chinese economy has slowed to a crawl, prompting a 7% sell off yesterday and a 20 billion dollar cash infusion this morning by the Chinese government. Stock markets around the world took their cue from China yesterday and sold off dramatically. Today, indications are that the sell off will continue. Saudi Arabia has withdrawn diplomatic recognition of Iran as the Sunni-Shia rivalry in the Muslim world escalates, providing an answer to the often asked question...the Middle East couldn't possible get worse, could it? Meanwhile, a group of ranchers are holed up in a federal facility in Oregon, promising violence against anyone who tries to dislodge them. Back in Washington, our government proceeds spending roughly 11 billion dollars every single day, even though they collect only 9.7 billion in revenue per day. Our current national debt is a little over 18 trillion dollars. Nobody, no political party, no Presidential candidate has any earthly idea how to pay that kind of money back. At the current rate of spending and the new trajectory of interest rates, in a few years we are going to have trouble just servicing that much debt. 

The weird thing is that 34 years ago when I got into business, our national debt was a mere 1 trillion, and everyone was freaking out because we had never seen a debt with that many zeros. Back then interest rates were through the roof, CD rates were 10-12%. My first home mortgage was over 13%! I remember some of the older guys in the business wondering whether or not we were about to go into a depression. We didn't. And now our debt is 18 times higher than it was then. So, I guess that when my liberal friends laugh at me for worrying about deficits and debt, they have a point. 

Still, I find it very difficult to think that 18 trillion dollars of debt simply doesn't matter. The interest payments on that debt will continually eat up an ever larger share of our national income over time, money that won't be available to provide a safety net, fight terrorism or maintain our National parks. All the smart people in Washington, when they talk about the debt at all, glibly assure us that we will "grow our way out of it." With an economic growth rate hovering around 2%, and 94 million people out of the workforce, I don't find that argument very persuasive.

But, sometimes I feel like I am the only American left who worries about it anymore. Trump, Cruz and Rubio aren't losing any sleep over it. Hillary and Bernie don't feel in any way constrained in their ambitions for an ever expanding and muscular federal government by the presence of an 18 trillion and growing outstanding obligation. So, we just go along with our collective plans to do nothing...except add to it. 

So, Dunnevant, you might ask, what would you do about it? Well, for starters, I suppose that I would impose an across the board cut in spending. Not a cut in the rate of increase of spending, an actual cut. You know...if your department spent 2 billion last year, this year you will have to get by on 1.8 billion. At least, that's what a spending cut looks like in my house. But Doug, an across the board cut assumes that all spending is of equal priority, when in fact some spending is essential and some isn't. It's the job of our political leaders to prioritize. True. But our political leaders have not demonstrated the required leadership skills to prioritize anything. So, it's just going to have to be across the board...no exceptions. But, what about defense? What about it? It gets cut. Deal with it, generals. Then, after my "draconian and heartless" budget cuts were in place, I would work on the revenue side by cutting...yes, cutting, some tax rates. Twice in my lifetime personal and corporate tax rates have been cut resulting in an increase in revenue to the Treasury (JFK and Reagan). Then I would eliminate all of the corporate welfare that has been caked into the tax code. This would make me public enemy number one on Wall Street, at the banks, down on the farm, and on K street. 

And then...I would be assassinated.